ACIT, CENTRAL CIRCLE-3, JAIPUR V. M/S. LAKHI GEMS, JAIPUR

ITA 1306/JPR/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0774 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 27-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Keywords: Bogus purchase; Rejection of books of accounts; Business income; Income from undisclosed sources; Loose papers; Document seized; Principle of natural justice; Opportunity of cross examination; Documents seized; Set aside
• Section: 271(1)(c); 143(3); 133(6); 69B; 207; 13; 145(3); 22; 147; 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES B JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1306/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-03, JAIPUR CUKE VS. M/S LAKHI GEMS, 295, 2 ND FLOOR, HANUMAN JI KA RASTA, JOHARI BAZAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAFL5913D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 04/JP/2020 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 1306/JP/2019) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR 2009-10 M/S LAKHI GEMS 901, 2 ND FLOOR, NARENDRA PLAZA GANGA MATA STREET, GOPAL JI KA RASTA, JOHARI BAZAR, JAIPUR CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-03, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAFL5913D IZR;K{KSID@ OBJECTOR IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SH. B. K. GUPTA (CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. P. C. PARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 24/03/2021 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 22/06/2021 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 2 THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-4, JAIPUR DATED 25.09.2019 FOR A.Y 2009-10 A ND THE CROSS OBJECTION FILED BY THE ASSESSEE WHEREIN RESPECTIVE GROUNDS OF APPEAL ARE AS UNDER:- GROUNDS OF REVENUES APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE & IN LAW THE LD. CIT(A) WAS RIGHT IN DELETING THE ADD ITION OF RS.7,02,120/- MADE BY THE AO ON ACCOUNT OF BOGUS PU RCHASES FROM VARIOUS PAPER COMPANIES. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LD. CIT(A) WAS RIGHT IN DELETING THE ADD ITION OF RS.15,19,533/- MADE BY THE AO ON ACCOUNT OF BOGUS P URCHASES FROM OR VARIOUS PAPER COMPANIES, AFTER CONFIRMING T HE REJECTION OF BOOKS OF ACCOUNTS. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LD. CIT(A) WAS RIGHT IN DELETING THE ADD ITION OF RS.3,11,11,600/- MADE BY THE AO ON ACCOUNT OF UNEXP LAINED INVESTMENT IN STOCK. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LD. CIT(A) WAS RIGHT IN DELETING THE ADD ITION OF RS.7,33,49,856/- MADE BY THE AO ON ACCOUNT OF UNACC OUNTED SALES BY IGNORING THE FINDINGS OF AO. GROUNDS OF ASSESSEES CROSS OBJECTION: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N UPHOLDING THE VALIDITY OF THE ORDER PASSED BY AO U/S 147 OF IT. A CT, 1961. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNTS BY APPLYING THE PROV ISIONS OF SECTION 145(3). ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 3 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE TRADING ADDITION OF RS. 3 LACS. 4. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 3,68,592/- ON THE BASIS OF VARIOUS LOOSE PAPERS IGNORING THAT NONE OF THESE PAPERS RELATE TO THE AS SESSEE. 2. REGARDING GROUND NO. 1 OF REVENUES APPEAL, BRIE FLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSMENT WAS COMPL ETED U/S 143(3) AT TOTAL INCOME OF RS.16,48,510/- AFTER DISALLOWING 25 % OF THE UNVERIFIABLE PURCHASES OF RS.46,80,799/-. BEFORE THE LD CIT(A), THE SAME WAS RESTRICTED TO RS.50,000/-. THE TRIBUNAL SET ASIDE T HE SAME FOR DECIDING ON THE BASIS OF THE DECISION OF RAJASTHAN HIGH COURT I N CASE OF ANUJ VARSHNEY. IN SET ASIDE ASSESSMENT PROCEEDINGS, THE AO AGAIN MADE DISALLOWANCE OF RS.7,02,120/- BEING 15% OF THE ALLE GED BOGUS PURCHASES OF RS.46,80,799/- BY HOLDING THAT ASSESSEE HAS NOT CONTROVERTED THAT THE PURCHASES ARE BOGUS AND UNVERIFIABLE. ON APPEAL, TH E LD CIT(A) HAS GIVEN A CONSOLIDATED FINDING IN RESPECT OF AFORESAID ADDI TIONS AND OTHER TRADING ADDITIONS OF RS 18,19,533/- AND HAS RESTRICTED THE OVERALL ADDITIONS TO RS 3,00,000/-. AGAINST THE SAID FINDINGS, THE REVE NUE IS IN APPEAL BEFORE US. 3. THE LD CIT/DR HAS RELIED ON THE ORDER OF THE ASS ESSING OFFICER AND OUR REFERENCE WAS DRAWN TO THE FINDINGS OF THE AO W HICH ARE CONTAINED AT PARA (V) AND (VI) OF THE ASSESSMENT ORDER WHICH REA DS AS UNDER: (V) THE ASSESSEE IN ITS REPLY HAS NOT CONTRAVENED THE FACT THAT THESE PURCHASES OF RS. 46,80,799/- ARE BOGUS AND UNVERIFI ABLE. THE ISSUE OF UNVERIFIABLE PURCHASES WAS UPHELD AT BOTH THE LEVEL S, THE CIT(A) AND THE ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 4 ITAT. AS SUCH, THE DECISION OF THE HON'BLE ITAT IN THE CASE OF ANUJ KUMAR VARSHNEY & OTHERS VS. ITO IS THE GUIDING LIGH T IN THE PRESENT CIRCUMSTANCES. HENCE, IN VIEW OF THE ABOVE DISCUSSI ON AS WELL AS THE TIME LIMITATION FOR THE FINALIZATION OF THIS CASE, A DISALLOWANCE @ 15% OUT OF THE BOGUS PURCHASES OF RS. 46,80,799/- AMOUN TING TO RS. 7,02,120/- IS BEING MADE TO THE TOTAL INCOME OF THE ASSESSEE WHICH REPRESENTS INCOME FROM UNVERIFIABLE SOURCES. PENALT Y U/S 271(1)(C) IS BEING INITIATED FOR CONCEALMENT OF INCOME BY FILING INACCURATE PARTICULARS. (VI) AS POINTED OUT ABOVE, THE ASSESSMENT ORDER ON THIS ISSUE IS SUBJECT TO THE OUTCOME OF THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF ANUJ KUMAR VARSHNEY & OTHERS VS. ITO (SUPRA), AND T HE ORDER WILL BE ACCORDINGLY RECTIFIED TO THIS EXTENT AS PER THE DIR ECTIONS OF THE HON'BLE HIGH COURT IN THE CASE OF ANUJ KUMAR VARSHNEY & OTH ERS VS. ITO. 4. PER CONTRA, THE LD. AR SUBMITTED THAT THE AO HAS WRONGLY MENTIONED THAT ASSESSEE HAS NOT CONTROVERTED THAT THE PURCHAS ES ARE BOGUS AND UNVERIFIABLE. THE ASSESSEE IS CONTROVERTING THE SAM E RIGHT FROM THE BEGINNING AND THEREFORE THE MATTER WENT UP TO THE T RIBUNAL. THE COMPLETE DETAILS OF THESE PURCHASES ALONG WITH OTHER DETAILS ARE ON RECORD BEFORE THE AO AND ALSO MENTIONED IN THE ORDER OF THE CIT(A ). THE AO IGNORED THESE EVIDENCES AND SIMPLY APPLIED RATE OF DISALLOW ANCE OF 15% WHICH IS INCORRECT. 5. IT WAS SUBMITTED THAT ASSESSEE HAS FILED ALL THE DETAILS REQUIRED TO VERIFY THE GENUINENESS OF THE PURCHASES IN THE ORIG INAL ASSESSMENT PROCEEDINGS. THEREFORE EVEN IF THE BOOKS OF ACCOUNT S ARE REJECTED, THAN IN SUCH CASES, AS HELD BY THE TRIBUNAL IN CASE OF HABI B KHAN VS. ACIT (ITA NO.415/JP/2013 DATED 29-08-2013), THE AO SHOULD EST IMATE THE INCOME ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 5 CONSIDERING THE PAST HISTORY OF THE CASE. THE GROSS PROFIT DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS COMPAR ED TO EARLIER YEARS IS AS UNDER:- ASSESSMENT YEAR SALES GROSS PROFIT (RS.) GROSS PROFIT (%) 2007-08 40094293 4981413 12.42% 2008-09 48242346 6412357 13.29% 2009-10 30760846 6435150 20.92% FROM THE ABOVE TABLE, IT CAN BE NOTED THAT THE GP R ATE DECLARED BY THE ASSESSEE IS BETTER AS COMPARED TO EARLIER YEARS THE REFORE, EVEN CONSIDERING THE PAST HISTORY, NO TRADING ADDITION S HOULD BE MADE EVEN IF SECTION 145 IS INVOKED. RELIANCE IS PLACED ON THE F OLLOWING CASES:- CIT VS. ALLIED GEMS CORPORATION (ITA NO.794/JP/11 O RDER DT.15.12.2017) DCIT VS. M/S GEMS PARADISE (ITA NO.747/JP/12 ORDER DT. 26.12.2017) CIT VS. VAIBHAV GEMS LTD. (2014) 112 DTR 84 DT. 21. 08.2014 (RAJ) CIT VS. SH. SINDHUJA FOODS PVT. LTD. (2008) 16 DTR 278 DT.24.10.2008 (RAJ.) (HC) CIT VS. INANI MARBLES PVT LTD. 316 ITR 125 (RAJ.) ( HC) KANSARA BEARINGS P. LTD VS. ACIT 270 ITR 235 (RAJ) MALANI RAMJIVAN JAGANNATH VS. ACIT 207 CTR (RAJ.)19 : IT WAS HELD THAT:- CIT VS. GOTAN LIME KHANIZ UDYOG 256 ITR 243(RAJ) ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 6 IN VIEW OF THE ABOVE THE TRADING ADDITION OF RS. 7, 02,120/- MADE BY THE AO IS UNCALLED FOR AND HAS BEEN RIGHTLY DELETED BY THE LD CIT(A). HE ACCORDINGLY SUPPORTED THE FINDINGS OF THE LD CIT(A) . 6. REGARDING GROUND NO. 2 OF THE REVENUES APPEAL & GROUND NO. 2 & 3 OF ASSESSEES CROSS OBJECTION, THE LD A/R SUBMITT ED THAT DURING THE YEAR UNDER CONSIDERATION, THE PURCHASES MADE BY THE ASSE SSEE INCLUDE PURCHASES FROM THE FOLLOWING PARTIES:- 7. IT WAS SUBMITTED THAT IN COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSEE VIDE LETTER DT.26-09-2016 FILED THE COPIES OF THE BILLS AS WELL AS CONFIRMATIONS OF THE PARTIES. THEREAFTER VIDE LETTE R DATED 22.11.2016, ASSESSEE FILED THE DETAILS LINKING THE PURCHASES WI TH THE SALES MADE BY HIM AND THE PROFIT EARNED ON THESE PURCHASES. THE AO, HOWEVER, REJECTED THE SAME BY MAKING THE FOLLOWING OBSERVATIONS:- (I) THERE IS NO PROOF THAT THE GOODS EXPORTED WERE PURC HASED FROM THESE PARTIES ONLY EXCEPT COPY OF THE BILLS WHICH W ERE PROVED AS BOGUS ON THE BASIS OF THE EVIDENCES FOUND IN SEARCH OF RA JENDRA JAIN GROUP. S.NO. PARTICULARS PURCHASES 1 M/S AVI EXPORTS 17,46,294/- 2 M/S KARNAWAT EXPORTS 18,57,636/- 3 M/S SUN DIAM 36,74,203/- TOTAL 72,78,133/- ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 7 (II) THOUGH THE ASSESSEE HAS SHOWN G.P. RATE OF 20.92% B UT IT DOES NOT DILUTE THE FACT THAT THE PURCHASES CLAIMED BY THE A SSESSEE FROM THREE PARTIES NEVER ACTUALLY INCURRED. (III) NO REPLY RECEIVED FROM THESE PARTIES U/S 133(6) TIL L 2 MONTHS BUT IMMEDIATELY AFTER SHOW CAUSE TO THE ASSESSEE THE RE PLY WAS RECEIVED GIVING COPY OF THE ACCOUNT OF LAKHI GEMS, ITR, BANK ACCOUNT AND CONFIRMATION. HOWEVER THE DESIRED INFORMATION WAS N OT FILED AND THE CONTENTS OF ALL THE LETTERS ARE SAME. (IV) THE STATEMENT OF RAJENDRA JAIN DESCRIBE MODUS OPER ANDI OF THEIR BUSINESS, CATEGORICALLY STATING THAT THEY ARE INDUL GED IN ISSUING BOGUS BILLS ONLY AGAINST CERTAIN COMMISSION WITHOUT ACTUA L TRADE AND THEREFORE NON MENTIONING OF THE NAME OF ASSESSEE DOES NOT TEN ABLE. ACCORDINGLY, THE AO REJECTED THE BOOKS OF ACCOUNTS BY APPLYING THE PROVISIONS OF SECTION 145(3) AND MADE TRADING ADDIT ION OF RS.18,19,533/- BY APPLYING 25% OF THE ALLEGED UNVERIFIABLE PURCHASES OF RS. 72,78,133/-. ON APPEAL, THE LD CIT(A) HAS UPHELD THE REJECTION OF B OOKS OF ACCOUNTS AND HAS RESTRICTED THE TRADING ADDITION OF RS 3 LACS. AGAI NST THE SAID FINDINGS, BOTH THE REVENUE AS WELL AS ASSESSEE ARE IN APPEAL. 8. IN THE ABOVE FACTUAL BACKGROUND, THE LD. AR SUBM ITTED THAT THE ASSESSEE IS MAINTAINING COMPLETE BOOKS OF ACCOUNT O N DAY-TO-DAY BASIS, WHICH ARE SUBJECT TO AUDIT. IN RESPECT OF THE PURCH ASES FROM M/S AVI EXPORTS, M/S SUN DIAM AND M/S KARNAWAT EXPORTS, THE ASSESSEE HAS FILED THEIR CONFIRMATION AND OTHER DETAILS. THE ENTIRE PA YMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE. THE AO HAS NOT BROUGHT ANY EV IDENCE TO PROVE THAT THE PURCHASES MADE ARE BOGUS AND THE PAYMENT MADE T O THIS PARTY HAS ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 8 COME BACK TO THE ASSESSEE. THE ASSESSEE HAS FILED T HE LINKING CHART OF PURCHASES MADE BY THE ASSESSEE WITH THE EXPORT SALE S. THE PROFIT EARNED ON SALE OF THE STOCK PURCHASED FROM THESE PARTIES I S MORE THAN THE PROFIT EARNED ON SALE OF STOCK PURCHASED FROM OTHER PARTIE S. ALL THE PARTIES HAVE FILED THE REPLY IN RESPONSE TO THE NOTICE U/S 133(6 ). IN THESE FACTS, THE PURCHASES MADE FROM THESE PARTIES ARE FULLY VERIFIA BLE. 9. SO FAR AS THE VARIOUS OBSERVATIONS OF THE AO ARE CONCERNED, IT WAS SUBMITTED THAT THE ASSESSEE HAS FILED THE LINKING C HART OF PURCHASES FROM THESE PARTIES WITH THE EXPORT SALES. IF THE AO WAS HAVING ANY DOUBT THAT ANY OTHER GOODS HAVE BEEN EXPORTED INSTEAD OF GOODS PURCHASED FROM THESE PARTIES, HE SHOULD HAVE BROUGHT THE MATERIAL ON RECORD WHICH HAS NOT BEEN DONE. THE PURCHASES ARE SUPPORTED BY THE BILLS AND SUBSEQUENT SALES AND THEREFORE IT IS INCORRECT ON THE PART OF THE AO TO SAY THAT PURCHASES MADE FROM THESE PARTIES WERE NEVER INCURRED. THESE PARTIES HAVE FILED THE REPLY AFTER THE SHOW CAUSE AS ASSESSEE CONTACTED TH EM AS TO WHY THEY HAVE NOT FILED THE REPLY WHEN THEY SOLD THE GOODS. THERE AFTER THEY FILED THE DETAILS. SIMPLY BECAUSE THEY DID NOT FILED THE COMP LETE DETAILS BUT THE DETAILS FILED IN THE FORM OF CONFIRMATION, BANK ACC OUNT AND THE RETURN CLEARLY PROVES THE FACT OF SALES MADE BY THEM TO THE ASSESS EE. IF THE AO WAS HAVING ANY DOUBT, HE SHOULD HAVE MADE FURTHER ENQUI RY FROM THEM. FURTHER THE AO MADE THE DISALLOWANCE SIMPLY BY REFERRING TO THE STATEMENT OF RAJENDRA JAIN. NO SPECIFIC QUESTION RELATING TO PUR CHASES MADE BY THE ASSESSEE FROM HIM WAS ASKED. FURTHER INSPITE OF SPE CIFIC REQUEST VIDE LETTER DATED 22-11-2016, NO OPPORTUNITY TO CROSS EXAMINE H IM WAS ALLOWED. THEREFORE THE ADDITION MADE BY THE AO WITHOUT PROVI DING OPPORTUNITY OF CROSS EXAMINATION IS AGAINST THE PRINCIPLE OF NATUR AL JUSTICE AND ILLEGAL & BAD IN LAW. HONBLE SUPREME COURT DECISION DATED 02.09. 2015 IN CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE 127 DTR 0241 HELD THAT DENIAL OF ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 9 OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE THE WI TNESSES WHOSE STATEMENTS WERE MADE THE SOLE BASIS OF THE ASSESSME NT IS A SERIOUS FLAW RENDERING THE ORDER A NULLITY IN AS MUCH AS IT AMOU NTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 10. IT WAS SUBMITTED THAT THE PURCHASES MADE BY THE ASSESSEE ARE FULLY VERIFIABLE. EVEN IF THE ACTION OF THE AO IS TREATED AS CORRECT THAN IN VIEW OF THE VARIOUS DECISIONS OF THE ITAT JAIPUR BENCH AND OTHER COURTS, DISALLOWANCE OF 25% OF ALLEGED UNVERIFIABLE PURCHAS ES IS UNJUSTIFIED. AT THE MOST, A REASONABLE G.P. RATE CONSIDERING THE PAST H ISTORY OF THE ASSESSEE SHOULD BE APPLIED. FOR THIS PURPOSE RELIANCE IS PLA CED ON THE VARIOUS CASES RELIED UPON IN GROUND SUPRA. SINCE THE G.P. RATE FO R THE YEAR IS BETTER AS COMPARE TO THE EARLIER YEARS, NO TRADING ADDITION I S REQUIRED. IN VIEW OF THE ABOVE, THE TRADING ADDITION OF RS.18,19,533 /- MADE BY THE AO IS UNCALLED FOR. IT WAS FURTHER SUBMITTED THAT THE LD CIT(A) H AS ACCEPTED THE FACT THAT THE G.P DECLARED BY THE ASSESSEE WAS BETTER THAN TH E EARLIER YEAR AND INSPITE OF THAT, HAS SUSTAINED THE TRADING ADDITION OF RS 3,00,000/- WHICH MAY BE DELETED. 11. PER CONTRA, THE LD DR HAS RELIED ON THE FINDING S OF THE ASSESSING OFFICER AND WE REFER TO THE CONCLUDING FINDINGS OF THE AO WHICH READ AS UNDER: (VI) IN THE PRESENT CASE, ASSESSEE CLAIMED TOTAL PURCHASES OF RS. 72,78,133/-, WHICH INCLUDED PURCHASES OF RS. 17,46, 294/- FROM M/S AVI EXPORTS, RS. 18,57,636/- FROM M/S KARNAWAT IMPEX PV T. LTD. AND RS. 36,74,203/- FROM M/S SUN DIAM. IT HAS ALREADY BEEN CATEGORICALLY PROVED BASED ON EVIDENCES AND VIVIDLY DISCUSSED IN THE PRECEDING PARAS, THAT THESE THREE CONCERNS ARE PAPER CONCERNS MANAGE D AND CONTROLLED ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 10 BY SHRI RAJENDRA JAIN GROUP. SINCE, THE ASSESSEE CO NCERN HAS CLAIMED TO HAVE EXPORTED THE STOCK ALLEGEDLY BOUGHT FROM TH ESE THREE CONCERNS, HENCE, IT IS CLEAR THAT THE STOCK WAS PURCHASED FRO M SOME OTHER UNIDENTIFIED PARTIES, ONLY KNOWN TO THE ASSESSEE. C ONSEQUENTLY, THE PURCHASES MADE FROM M/S AVI EXPORTS, M/S KARNAWAT I MPEX PVT. LTD. AND M/S SUN DIAM ARE HELD AS BOGUS PURCHASES, MADE FOR THE SOLE PURPOSE OF DEFLATING ITS ACTUAL PROFITS AND THE ASS ESSEE'S BOOKS ARE THEREFORE, REJECTED U/S 145(3) OF THE IT ACT, 1961 ON THIS GROUND. HOWEVER, BASED ON THE ABOVE DISCUSSION AS WELL AS LOOKING TO ALL POSSIBILITIES, 25% OF THE TOTAL PURCHASES OF RS. 72,78,133/- ARE BEING DI SALLOWED, WHICH COMES OUT AT RS. 18,19,533/- AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS A CASE WHE RE THE BOOKS OF ACCOUNTS ARE REJECTED BY THE AO ON ACCOUNT OF UNVERIFIABLE P URCHASES AND IN SUCH A SCENARIO, IT IS A CONSISTENT POSITION TAKEN BY JAIP UR BENCHES WHEREIN WE HAVE HELD THAT ONCE THE BOOKS OF ACCOUNTS HAVE B EEN REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT, THE ASSESSING OFFICER IS REQUIRED TO MAKE THE ASSESSMEN T ON THE BASIS OF HIS BEST JUDGMENT AND A FAIR ESTIMATE OF INCOME HAS TO BE MADE INSTEAD OF RESORTING TO MAKING THE ADDITION TO THE BOOK RESULT S WHICH ALREADY STAND REJECTED OR ANY ALTERATION IN THE BOOK RESULTS. IN THE INSTANT CASE, THE BOOK RESULTS HAVE BEEN RIGHTLY REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT ON ACCOUNT OF UNVERIFIED PURCHASE S AND THE AO HAS DISALLOWED 15% OF UNVERIFIED PURCHASES OF RS 46,80, 799/- IN FIRST SET OF TRANSACTIONS AND IN ANOTHER SET OF TRANSACTIONS, HA S DISALLOWED 25% OF UNVERIFIED PURCHASES AMOUNTING TO RS 72,78,133/-. I T IS A CASE WHERE THE PURCHASES FROM SPECIFIED PARTIES HAVE REMAIN UNVERI FIED, HOWEVER, THE REVENUE HAS NOT DISPUTED THE FACT THAT PURCHASES HA VE BEEN MADE BY THE ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 11 ASSESSEE AND THERE ARE CORRESPONDING SALES. THEREFO RE, IN SUCH CIRCUMSTANCES, WHERE THE BOOKS HAVE BEEN REJECTED, THE ESTIMATION OF INCOME IS REQUIRED TO BE MADE AND FOR THE PURPOSES, PAST HISTORY HAS BEEN HELD AS A RELIABLE BASIS. ON APPEAL, THE LD CIT(A) HAS RIGHTLY APPLIED THE AFORESAID LEGAL PROPOSITION AS ALSO DECIDED CONSIST ENTLY BY THE JAIPUR BENCHES AND HAS RELIED ON THE PAST HISTORY OF THE A SSESSEE IN ESTIMATING THE GROSS PROFIT RATE AND HAS RESTRICTED THE TRADING AD DITION TO RS 3 LACS AND WE ACCORDINGLY DONOT SEE ANY INFIRMITY IN THE FOLLOWIN G FINDINGS OF THE LD CIT(A) WHICH ARE CONTAINED AT PARA 11 TO 11.3 OF HIS ORDER AND WHICH ARE HEREBY CONFIRMED: 11. GROUND NO. 2 TO 4 ARE INTER RELATED AND THEREF ORE DECIDED TOGETHER. IN GROUND NO. 2 THE APPELLANT CHALLENGED REJECTION OF THE BOOKS OF ACCOUNTS. IN GROUND NO. 3 THE APPELLANT CHALLENGED ADDITION OF RS. 7,02,120/- ON DISALLOWANCE OF 15% OF THE ALLEGED UN VERIFIABLE PURCHASES OF RS. 46,80,799/-. IN GROUND NO. 4 THE APPELLANT HAS CHALLENGED ADDITION OF RS. 18,19,533/- ON DISALLOWANCE OF 25% OF THE ALLEG ED UNVERIFIABLE PURCHASES OF RS. 72,78,133/-. 11.2 ON PERUSAL OF THE OVERALL FACTS IT IS SEEN THA T IN SEARCH OF RAJENDRA JAIN GROUP, SH. RAJENDRA JAIN ACCEPTED THAT THEY AR E PROVIDING ONLY THE ACCOMMODATION BILLS. THE PURCHASES MADE FROM THESE PARTIES ARE RELATED TO THIS GROUP. THEREFORE THE SAME CANT BE SAID TO BE VERIFIABLE. ACCORDINGLY THE AO RIGHTLY REJECTED THE BOOKS OF ACCOUNTS BY AP PLYING THE PROVISIONS OF SECTION 145(3) OF THE ACT. IN ASSESSMENT PROCEEDINGS, THE APPELLANT HAS FI LED THE CONFIRMATION OF THE PARTIES. HOWEVER THE FACT REMAINS THE SAME THAT SHRI RAJENDRA JAIN ACCEPTED THE FACT OF PROVIDING ACCOMMODATION ENTRIE S. FURTHER IT IS A SETTLED ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 12 LAW THAT ONCE THE BOOKS OF ACCOUNTS IS REJECTED THE PROFIT IS TO BE ESTIMATED BY APPLYING THE G.P RATE ON THE BASIS OF THE PAST H ISTORY. HONBLE RAJASTHAN HIGH COURT AND ITAT JAIPUR BENCH IN THE VARIOUS CAS ES REFERRED BY THE APPELLANT HAS HELD THAT ONCE BOOKS OF ACCOUNTS IS R EJECTED, THE INCOME IS TO BE ESTIMATED CONSIDERING THE PAST HISTORY OF THE CA SE. THE POSITION OF THE PAST HISTORY OF THE ASSESSEE IS AS UNDER:- A.YR. SALES GROSS PROFIT (RS.) GROSS PROFIT (%) 2007-08 40094293 4981413 12.42% 2008-09 48242346 6412357 13.29% 2009-10 30760846 6435150 20.92% 11.3 THE G.P DECLARED FOR THE YEAR UNDER CONSIDERAT ION IS BETTER AS COMPARED TO THE LAST YEAR. HOWEVER CONSIDERING THE FACT THAT THERE ARE UNVERIFIABLE PURCHASES. I FIND THAT IT WOULD BE REA SONABLE AND MEET THE END OF JUSTICE IF THE TRADING ADDITION IS RESTRICTED TO RS. 3,00,000/-. 13. IN THE RESULT, THE GROUND NO. 1 AND 2 OF THE RE VENUES APPEAL AND GROUND NO. 2 & 3 OF THE ASSESSEES APPEAL ARE HEREB Y DISMISSED. 14. REGARDING GROUND NO. 3 OF THE REVENUES APPEAL, BRIEFLY STATED FACTS OF THE CASE ARE THAT IN SEARCH PROCEEDINGS CO NDUCTED IN CASE OF BIHARI LAL HOLA RAM GROUP TO WHICH THE ASSESSEE BELONGS, A PAPER DATED 23.08.2008 AT PAGE NO. 5 OF EXHIBIT 61 WAS SEIZED F ROM THE RESIDENCE OF SH. NARENDRA LAKHI, PARTNER OF THE ASSESSEE FIRM, SITUA TED AT A-JA-14 JAWAHAR NAGAR JAIPUR AND BASIS THE SAID SEIZED PAPER, THE A O HAS BROUGHT TO TAX AN AMOUNT OF RS 3,11,11,600/- U/S 69B AS UNDISCLOSED I NVESTMENT IN STOCK. ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 13 ON APPEAL, THE LD CIT(A) HAS DELETED THE SAID ADDIT ION. THE REVENUE IS IN APPEAL BEFORE US WHEREIN IT HAS ASSAILED THE FINDIN GS OF THE LD CIT(A). 15. DURING THE COURSE OF HEARING, THE LD CIT/DR HAS RELIED PRIMARILY ON THE FINDINGS OF THE AO WHICH READS AS UNDER: ONE PAGE, PG 5, EXHIBIT-61 OF ANNEXURE AS SEIZED F ROM THE RESIDENCE OF THE ASSESSEE, 4-JA-14, JAWAHAR NAGAR, JAIPUR HAS MENTION OF OFFICE KG, WHICH AS PER THE ASSESSEE REFERS TO TRANSFER O F STOCK FROM BIHARI LAL HALARAM SHOWROOM TO NARENDRA PLAZA OFFICE. IT I S PERTINENT TO REMIND, THAT THESE DETAILS PERTAIN TO UNACCOUNTED N OTEPADS, HENCE, IT IMPLIES THAT STOCK USED TO BE TRANSFERRED FROM ONE CONCERN TO ANOTHER CONCERN WITHOUT ANY RECORD MADE IN THE BOOKS OF ACC OUNTS. THEREFORE, THIS UNACCOUNTED STOCK DESERVES TO BE ADDED TO THE TOTAL INCOME OF M/S LAKHI GEMS U/S 69B AS UNDISCLOSED INVESTMENT IN STOCK. ADDITION OF RS. 3,11,11,600/- IS MADE TO THE INCOME OF M/S L AKHI GEMS ON THIS ACCOUNT FOR AY 2009-10. 16. PER CONTRA, THE LD AR SUBMITTED THAT THE HEADIN G OF THIS PAPER IS OFFICE KG AND THEREAFTER TWO ITEMS OF PANNA, QT Y AND AMOUNT IS NOTED AS UNDER:- PANNA 61.75 CT. 5000 PANNA 23.66 CR. 100 IT WAS SUBMITTED THAT IN SEARCH, NO STATEMENT ON TH IS PAPER WAS RECORDED. SUBSEQUENTLY IN ASSESSMENT PROCEEDING, SH. NARENDRA LAKHI STATED THAT THE PAPER REFERS TO THE TRANSFER OF THE STOCK FROM BIHA RILAL HOLA RAM SHOWROOM TO NARENDRA PLAZA OFFICE. THE AO OBSERVED THAT THIS PAPER IS PART OF CERTAIN UNACCOUNTED NOTEPAD FOUND IN SEARCH AND THEREFORE I T IMPLIES THAT STOCK ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 14 HAS BEEN TRANSFERRED FROM ONE CONCERN TO ANOTHER CO NCERN WITHOUT ANY RECORD MADE IN THE BOOKS OF ACCOUNTS. HE, THEREFORE , ASSUMED THAT THE PAPER INDICATE UNDISCLOSED INVESTMENT IN THE STOCK OF THE ASSESSEE AND ACCORDINGLY MADE ADDITION OF RS.3,11,11,600/- U/S 6 9B CALCULATED AS UNDER:- PANNA 61.75 CT. @RS.5,00,000/- PER CT. = 3,08,75 ,000/- PANNA 23.66 CR. @RS.10,000/- PER CT. = 2,36 ,600/- ---------------- 3,11,11,600/- 17. IT WAS SUBMITTED THAT THERE IS NO BASIS WITH TH E AO TO RELATE THIS PAPER WITH THE ASSESSEE. NOWHERE ON THE PAPER, THE NAME OF THE ASSESSEE IS MENTIONED. IN FACT, THE TITLE OF THIS PAPER IS OFFICE KG WHICH MEANS OFFICE OF KUSHBOO JEWELLERS, A PROPRIETARY CONCERN OF CHANCHAL LAKHI. THUS WHEN THIS PAPER DO NOT RELATE TO THE ASSESSEE FIRM, THE ADDITION MADE BY THE AO IS WITHOUT BASIS. 18. IT WAS SUBMITTED THAT THE AO AT PAGE 24 OF HIS ORDER HAS STATED THAT IN SEARCH VARIOUS NOTEPADS/PAPERS WERE FOUND. SH. N ARENDRALAKHI HAS STATED THAT THE TRANSACTIONS RECORDED IN THESE PAPE RS PERTAIN TO BIHARILAL HOLARAM/LAKHI GEMS/KUSHBOO JEWELLERS/SIDDHANT JEWEL S/ROYAL JEWELS. HE THEREFORE INFERRED THAT UNDISCLOSED INCOME DETECTED FROM THESE DOCUMENTS CAN BE LEGALLY TAXED IN ANY ONE OF THE ENTITIES OF THE BIHARILALHOLARAM GROUP. THIS FINDING OF THE AO IS APPARENTLY INCORRE CT. IT IS SUBMITTED THAT IN SEARCH, SH. NARENDRA LAKHI IN THE STATEMENT RECO RDED ON 10-2-2015 IN REPLY TO Q.NO.19, HAS EXPLAINED THAT THESE NOTE BOO KS ARE RELATED TO F.Y. 2008-09 AND MAY CONTAIN RECORDS OF THEIR OLD FIRMS NAMELY SIDDHANT JEWELLS, ROYAL GEMS SOURCES AND KUSHBOO JEWELLS. TH US NOWHERE HE HAS REFERRED TO M/S LAKHI GEMS IN THIS STATEMENT. FURTH ER WHEN ON THE PAPER ITSELF THERE IS AN INDICATION OF THE OFFICE OF KUSH BOO JEWELLERS AND THERE IS ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 15 NO REFERENCE OF LAKHI GEMS ON THIS PAPER, NO ADDITI ON ON THE BASIS OF THIS PAPER CAN BE MADE IN THE HANDS OF THE ASSESSEE. 19. IT WAS FURTHER SUBMITTED THAT SH. NARENDRA LAKH I IN COURSE OF ASSESSMENT PROCEEDING HAS STATED THAT THE NOTING ON THE PAPER REFERS TO TRANSFER OF THE STOCK FROM BIHARILAL HOLA RAM SHOWR OOM TO NARENDRA PLAZA OFFICE. IT MAY BE NOTED THAT OFFICE OF M/S KUSHBOO JEWELLERS IS AT 901, NARENDRA PLAZA, NEAR GOSHALA, GANGA MATA STREET, GO PALJIKA RASTA, JAIPUR. THIS IS ALSO EVIDENT FROM VAT REGISTRATIO N CERTIFICATE OF M/S KUSHBOO JEWELLERS. THIS CONCLUSIVELY PROVES THAT TH E PAPER DO NOT RELATES TO THE ASSESSEE AND THEREFORE, NO ADDITION ON THE B ASIS OF THIS PAPER IS CALLED FOR IN THE HANDS OF THE ASSESSEE. 20. IT WAS FURTHER SUBMITTED THAT OTHERWISE ALSO FR OM THE PAPER ITSELF IT IS NOT ASCERTAINABLE WHETHER IT IS IN RESPECT OF PU RCHASE OF THE GOODS OR SALE OF THE GOODS OR TRANSFER OF THE GOODS OR FOR W HAT PURPOSE SUCH NOTING IS MADE. THERE IS NO INDICATION OF ANY PAYMENT MADE OR RECEIVED ON THIS PAPER. THE PAPER ONLY MENTIONS THE QUANTITY AND THE AMOUNT. THE AO HAS CONSIDERED THIS AMOUNT AS RATE OF PANNA PER CARET. THERE IS NO BASIS FOR THE SAME. IT APPEARS THAT THE AMOUNT MENTIONED ON T HIS PAPER IS THE VALUE OF THE QUANTITY OF THE PANNA. THUS THE AMOUNT NOTED ON THIS PAPER AFTER CONSIDERING 00 IS RS.5,10,000/- AND NOT RS. 3,11,11,600/- AS ASSUMED BY THE AO. IN VIEW OF THE ABOVE, THE ADDIT ION MADE BY THE AO ON SURMISES, CONJECTURES, ASSUMPTIONS AND PRESUMPTI ON IS UNCALLED FOR AND HAS BEEN RIGHTLY DELETED BY THE LD CIT(A). 21. HE ACCORDINGLY SUPPORTED THE ORDER AND THE FIND INGS OF THE LD CIT(A) WHICH ARE CONTAINED AT PARA 14.3 TO 14.6 OF HIS ORD ER WHICH READS AS UNDER: ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 16 14.3 MY OBSERVATIONS AFTER SEEING THE LOOSE SLIP A ND WHAT THE BASIC INGREDIENTS OF AFORESAID LOOSE DOCUMENTS ARE AS UND ER: THE ADDITION IS MADE ON THE BASIS OF PAGE NO. 5 OF EXHIBIT 61 SEIZED FROM THE RESIDENCE OF SH. NARENDRA LAKHI AT A-JA-14 JAWAHAR NAGAR JAIPUR. THIS PAPER IS DATED 23.08.2008. THE HEADING OF THIS PAPER IS OFFICE KG AND THEREAFTER TWO ITEMS OF PANNA, QTY AND AMOUNT IS NOTED AS UNDER:- PANNA 61.75 CT. 5000 PANNA 23.66 CR. 100 14.4 ON PERUSAL OF THE PAPER IT IS SEEN THAT NOWHER E ON THE PAPER THE NAME OF THE ASSESSEE IS MENTIONED. THE TITLE OF THIS PAPER IS OFFICE KG WHICH MEANS OFFICE OF KUSHBOO JEWELLERS, A PROP RIETARY CONCERN OF CHANCHAL LAKHI. IT IS FURTHER SEEN THAT SH. NARENDR A LAKHI IN THE STATEMENT RECORDED ON 10.02.2015 IN REPLY TO Q. NO. 19, HAS EXPLAINED THAT THESE NOTE BOOKS ARE RELATED TO F.Y 2008-09 AN D MAY CONTAIN RECORDS OF THEIR OLD FIRMS NAMELY SIDDHANT JEWELLS, ROYAL GEMS SOURCES AND KUSHBOO JEWELLS. NOWHERE HE HAS REFERRE D TO M/S LAKHI GEMS IN THIS STATEMENT. IT IS FURTHER SEEN THAT SH. NARENDRA LAKHI IN COURS E OF ASSESSMENT PROCEEDING HAS STATED THAT THE NOTING ON THE PAPER REFERS TO TRANSFER OF THE STOCK FROM BIHARILAL HOLA RAM SHOWROOM TO NA RENDRA PLAZA OFFICE. OFFICE OF M/S KUSHBOO JEWELLERS IS AT 901, NARENDRA PLAZA, NEAR GOSHALA, GANGA MATA STREET, GOPAL JI KA RASTA, JAIP UR. THIS ALSO PROVES THAT THE PAPER DO NOT RELATES TO THE ASSESSE E. ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 17 14.5 I FURTHER FOUND THAT FROM THE PAPER ITSELF IT IS NOT ASCERTAINABLE WHETHER IT IS IN RESPECT OF PURCHASE OF THE GOODS OR SALE OF THE GOODS OR TRANSFER OF THE GOODS OR FOR WHAT P URPOSE SUCH NOTING IS MADE. THERE IS NO INDICATION OF ANY PAYMENT MADE OR RECEIVED ON THIS PAPER. THE PAPER ONLY MENTION THE QUANTITY AND THE AMOUNT. THE CLAIM OF THE APPELLANT THAT THE AMOUNT NOTED ON THI S PAPER AFTER CONSIDERING 00 IS RS. 5,10,000/- AND NOT RS. 3,11 ,11,600/- APPEARS TO BE ACCEPTABLE. 14.6 CONSIDERING ALL THESE FACTS I FIND THAT THIS P APER NOWHERE RELATES TO THE ASSESSEE & IS A PURE DUMB DOCUMENT. NEITHER THIS DOCUMENT WAS FOUND IN SEARCH OF ASSESSEES PREMISES NOR ANY EVIDENCE WAS FOUND TO PROVE THAT THIS PAPER BELONGS TO THE ASSESSEE. THEREFORE THE ADDITION OF RS. 3,11,11,600/- MADE ON THE BASIS OF THIS PAPER IS DELETED. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED POSITION WHICH EMERGES IS THAT THE IMPUGNED DOCUMENT DATED 23.08.2008 REFERRED TO AS P AGE NO. 5 OF EXHIBIT 61 WAS PART OF BLUE COLOURED NOTE PAD SEIZED FROM T HE RESIDENCE OF SHRI NARENDRA LAKHI, THE PARTNER OF THE ASSESSEE FIRM DU RING THE COURSE OF SEARCH CONDUCTED ON 10.12.2015. IN HIS STATEMENT R ECORDED U/S 132(4) ON 10.12.2015, IN RESPONSE TO QUESTION NO. 19, SHRI NARENDRA LAKHI HAS STATED THAT HE HAS GONE THROUGH NOTE PAD PAGES NO. 61 TO 101 AND THE SAME BELONGS TO HIM AND HIS FAMILYS FIRMS FOR THE YEAR 2008 AND HE WILL LATER ON SUBMIT THE EXPLANATION RELATING TO THE TRA NSACTIONS AND OTHER DETAILS STATED IN THE SAID NOTE PAD. IN HIS SUBSEQ UENT STATEMENT RECORDED U/S 132(4) ON 15.12.2015, IN RESPONSE TO QUESTION N O. 5, HE HAS STATED THAT THE LOOSE PAPERS, DIARIES, NOTE BOOKS WHICH HA VE BEEN SEIZED FROM THE OFFICIAL PREMISES AND THE RESIDENTIAL PREMISES RELATES TO M/S BHIHARI LAL ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 18 HOLA RAM AND M/S LAKHI GEMS. WE THEREFORE FIND THA T THOUGH IN THE INITIAL STATEMENT, HE WAS NOT SPECIFIC ABOUT WHICH FIRMS THE DOCUMENTS PERTAINS TO AND HAS SOUGHT TIME TO EXPLAIN THE TRAN SACTIONS, HOWEVER, IN THE LATTER STATEMENT, HE HAS CATEGORICALLY STATED T HAT THE DOCUMENTS SO SEIZED PERTAINS TO TWO FIRMS NAMELY, M/S BHIHARI LA L HOLA RAM AND M/S LAKHI GEMS, THE ASSESSEE FIRM. 23. NEXT QUESTION THAT ARISES FOR CONSIDERATION IS WHAT IS THE NATURE OF TRANSACTION RECORDED IN THE SAID SEIZED PAPER. BOT H THE AO AS WELL AS THE LD CIT(A) HAVE RECORDED A FINDING THAT THE TRANSACT ION RELATES TO TRANSFER OF STOCK FROM M/S BHIHARI LAL HOLA RAMS SHOWROOM T O NARENDRA PLAZA SHOWROOM AND THUS, THE FACT THAT THERE HAS BEEN TRA NSFER OF STOCK REMAINS AN UNDISPUTED FACT. AT THE SAME TIME, THE CONTENTI ON OF THE ASSESSEE IS THAT OFFICE OF ANOTHER GROUP FIRM M/S KHUSBOO JEWEL LERS IS AT 901, NARENDRA PLAZA, GOPALJI KA RASTA AND NOT THAT OF TH E ASSESSEE FIRM. HOWEVER, IN RESPONSE TO QUESTION NO. 3 OF HIS SECON D STATEMENT RECORDED U/S 132(4) ON 15.12.2015, HE HAS CLEARLY STATED THA T STOCK OF BOTH FIRMS M/S BHIHARI LAL HOLA RAM AND M/S LAKHI GEMS HAS BEE N KEPT AT 901, NARENDRA PLAZA GOPALJI KA RASTA WHICH CONTRADICTS T HE CONTENTION SO ADVANCED BY THE ASSESSEE. 24. THE QUESTION THAT REMAINS TO BE ANSWERED IS WHE THER THE SAID STOCK TRANSFER IS INTERSE TWO OFFICES OF M/S BHIHARI LAL HOLA RAM OR THERE I S STOCK TRANSFER FROM M/S BHIHARI LAL HOLA RAM TO M/S LAKHI GEMS. IN EITHER CASE, THE FACT REMAINS IS THAT THERE IS A TRANSFER OF STO CK EITHER BETWEEN TWO OFFICES OF M/S BHIHARI LAL HOLA RAM OR FROM M/S BHI HARI LAL HOLA RAM TO M/S LAKHI GEMS AND IN ABSENCE OF ANYTHING CONTRARY BROUGHT ON RECORD WHICH DEMONSTRATE CLEARLY THAT OWNERSHIP OF STOCK L IES WITH THE ASSESSEE FIRM, A PRESUMPTION WILL ARISE THAT THE SAID STOCK HAVING BEEN ORIGINATED ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 19 AND TRANSFERRED FROM THE PREMISES OF M/S BHIHARI LA L HOLA RAM, THE OWNERSHIP OVER SUCH STOCK LIES WITH M/S BHIHARI LAL HOLA RAM AND THE SAID STOCK BELONGS TO M/S BHIHARI LAL HOLA RAM AND THE A DDITION TOWARDS UNDISCLOSED INVESTMENT IN STOCK U/S 69B, WHERE SO R EQUIRED TO BE MADE, CAN BE MADE IN THE HANDS OF M/S BHIHARI LAL HOLA RA M AND NOT IN THE HANDS OF M/S LAKHI GEMS. IN LIGHT OF THE SAME AND IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND FOR THE REASONS S TATED ABOVE, WE UPHELD THE ORDER OF THE LD CIT(A) AND THE GROUND OF APPEAL SO TAKEN BY THE REVENUE IS HEREBY DISMISSED. 25. REGARDING GROUND NO. 4 OF REVENUES APPEAL AND GROUND NO. 4 OF ASSESSEES CROSS OBJECTION, BRIEFLY STATED FACTS OF THE CASE ARE THAT IN SEARCH CARRIED OUT ON BIHARI LAL HOLARAM GROUP ON 1 0-12-2015, VARIOUS LOOSE PAPERS, NOTEPADS AND DIARIES WERE FOUND. SEVE RAL SUCH NOTE PADS AND LOOSE PAPERS WERE FOUND FROM RESIDENCE OF SHRI NARENDRA LAKHI. THESE PAPERS INDICATE UNACCOUNTED CASH SALES MADE BY THE ASSESSEE GROUP. SH. NARENDRA LAKHI IN HIS STATEMENT IN REPLY TO QUESTIO N NO.19, ADMITTED THAT THESE NOTEPAD SEIZED FROM HIS RESIDENCE PERTAINS TO F.Y. 2008-09 AND RELATES TO HIS CONCERNS M/S SIDDHANTS JEWELS, M/S R OYAL GEMS AND M/S KUSHBOO JEWELLERY. THESE ANNEXURES WERE INVENTORISE D AS ANNEXURE AS 32 TO 101. IT IS ALSO ACCEPTED THAT THE AMOUNT WRITTEN ON THESE PAPERS ARE AFTER OMITTING 00. CONSIDERING THE VARIOUS LOOSE PAPERS FOUND FROM DIFFERENT PREMISES, SHRI NARENDRA LAKHI OFFERED RS. 4 CR AS UNDISCLOSED INCOME OF M/S BIHARI LAL HOLARAM. 26. THE AO AT PAGE 24 & 25 OF HIS ORDER OBSERVED TH AT FROM THE SEIZED MATERIAL, IT IS NOT POSSIBLE TO ASCERTAIN AS TO WHI CH PARTICULAR ENTITY OF THE ASSESSEE GROUP IS INDULGED IN UNACCOUNTED SALES. TH EREFORE HE CONCLUDED THAT TAXING SUCH UNDISCLOSED INCOME IN ANY ONE OF T HE ENTITIES OF BIHARILAL ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 20 HOLARAM GROUP WOULD BE LEGAL AND APPROPRIATE IF THE ADDITION IS NOT MADE IN ANY OTHER ENTITY FOR A.Y. 2009-10. HE THEREAFTER WORKED OUT THE AMOUNT OF SALE ON THE BASIS OF THESE LOOSE PAPERS/NOTEPADS AT RS.7,37,18,448/- (AO PAGE 32 TO 44) AND MADE ADDITION FOR THE SAME B Y NOT ACCEPTING THE VARIOUS CONTENTIONS RAISED BY THE ASSESSEE. 27. DURING THE COURSE OF HEARING, THE LD CIT/DR SUP PORTED THE ORDER OF THE AO AND OUR REFERENCE WAS DRAWN TO THE FINDINGS OF THE AO WHICH READ AS UNDER: THE A/R'S PLEA THAT THERE IS NO INDICATION THAT TH ESE PAPERS RELATE TO THE M/S LAKHI GEMS IS NOT TENABLE. IN THIS CONTEXT, IT IS TO PUT ON RECORD THAT DURING THE COURSE OF SEARCH PROCEEDINGS, WHEN SHRI NARENDRA LAKHI WAS EXAMINED ON OATH WITH REGARD TO THE ENTITY TO WHICH THE TRANSACTIONS IN THE BLUE NOTEPADS BELONG, HE STATED THAT THESE UNAC COUNTED TRANSACTIONS RECORDED IN THE SEIZED DOCUMENTS PERTAIN TO M/S BIH ARI LAL HOLA RAM / M/S LAKHI GEMS / M/S KHUSBOO JEWELLERS / M/S SIDDHA NT JEWELS OR M/S ROYAL GEMS. THUS, HE HIMSELF COULD NOT SPECIFY AS T O WHICH PARTICULAR TRANSACTION RECORDED IN THE SEIZED DOCUMENTS PERTAI NS TO WHICH PARTICULAR ENTITY OF HIS GROUP. FURTHER, THE ASSESSEE CONCERN AS WELL AS ALL OTHER CONCERNS OF THE 'BIHARI LAL HOLA RAM' GROUP, NAMELY M/S BIHARI LAL HOLA RAM/LAKHI GEMS/M/S KHUSBOO EWELLERS/M/S SIDDHANT JEWELS/M/S R OYAL GEMS/M/S BIHARI LAL HOLARAM JEWELS PRIVATE LIMITED ARE ALL E NGAGED IN THE SAME BUSINESS OF GEMSTONES AND OPERATE FROM THE SAME ADD RESSES. AS SUCH, IT IS NOT POSSIBLE FROM THE SEIZED MATERIAL TO ASCE RTAIN AS TO WHICH PARTICULAR ENTITY OF THE ASSESSEE GROUP HAS INDULGE D IN UNACCOUNTED SALES. THIS FACT IS FURTHER VALIDATED BY THE FACT T HAT THE ASSESSEE ITSELF HAS MADE A MENTION OF A SEIZED DOCUMENT, PAGE 5, EX HIBIT 61, ANNEXURE ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 21 AS SEIZED FROM HIS RESIDENCE AT 4-JA-14, JAWAHAR NA GAR, JAIPUR, THAT THE STOCK HAS BEEN TRANSFERRED FROM BH [BIHARI LAL HOLA RAM] TO NARENDRA PLAZA. ON THE AFORESAID PAGE, 'OFFICE KG' IS MENTIO NED, MEANING THEREBY THAT THE STOCK USED TO BE TRANSFERRED FROM ONE CONCERN TO ANOTHER CONCERN WITHOUT ANY RECORD MADE IN THE BOOK S OF ACCOUNTS. THUS, IT IS CLEAR THAT AS MUCH AS THESE UNACCOUNTED TRANSACTIONS PERTAIN TO M/S BIHARI LAL HOLARAM, THAT MUCH THEY PERTAIN TO M /S LAKHI GEMS OR M/S KHUSBOO JEWELLERS OR M/S SIDDHANT JEWELS OR M/S ROY AL GEMS OR M/S BIHARI LAL HOLARAM JEWELS PRIVATE LIMITED OR ANY OTHER CON CERN OF THE GROUP AS LONG AS IT IS NOT ACCOUNTED FOR IN ANY PARTICULAR C ONCERN. ALSO, ALL THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH, ON WHICH THE INSTANT ADDITION IN THE CASE FOR AY 2009- 10 IS PROPOSED, WERE SEIZED FROM THE RESIDENCE OF SHRI NARENDRA LAKHI, P ARTNER OF M/S LAKHI GEMS [4-JA-14, JAWAHAR NAGAR, JAIPUR]. AS PER THE P ROVISIONS OF SECTION 132(4A), THE DOCUMENTS BELONG TO THE ASSESSEE GROUP . THE FOLLOWING PROVISIONS OF SECTION 132(4A) ARE REPRODUCED AS UND ER: '(4A) WHERE ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING ARE OR IS FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE COURSE O F A SEARCH, IT MAY BE PRESUMED- (I) THAT SUCH BOOKS OF ACCOUNT, OTHER DOCUMENTS, MO NEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING BELONG OR BELONGS TO SUCH PERSON; (II) THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS ARE TRUE; AND (III) THAT THE SIGNATURE AND EVERY OTHER PART OF SU CH BOOKS OF ACCOUNT AND OTHER DOCUMENTS WHICH PURPORT TO BE IN THE HAND WRITING OF ANY PARTICULAR PERSON OR WHICH MAY REASONABLY BE ASSUME D TO HAVE BEEN ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 22 SIGNED BY, OR TO BE IN THE HANDWRITING OF, ANY PART ICULAR PERSON, ARE IN THAT PERSON' S HANDWRITING, AND IN THE CASE OF A DO CUMENT STAMPED, EXECUTED OR ATTESTED, THAT IT WAS DULY STAMPED AND EXECUTED OR ATTESTED BY THE PERSON BY WHOM IT PURPORTS TO HAVE BEEN SO EXECUTED OR ATTESTED.]' THUS, TAXING THE UNDISCLOSED INCOME DETECTED FROM T HESE SEIZED DOCUMENTS, IN ANY ONE OF THE ENTITIES OF THE 'BIHAR I LAL HOLA RAM' GROUP, WOULD BE PERFECTLY LEGAL AND APPROPRIATE AS FAR AS ADDITION OF THIS INCOME IS NOT MADE IN OTHER ENTITIES FOR AY 2009-10. BASED ON THE PERUSAL OF THE SEIZED DOCUMENTS, IT IS ABUNDANTLY CLEAR THAT THE ASSESSEE GROUP HAS BEEN INDULGING IN UNACCOUNTED SALES AT A VERY LARGE SCALE. IT HAS BEEN CLEARLY ES TABLISHED FROM THE SEIZED RECORD THAT ONLY SALES ARE SUPPRESSED BY THE ASSESSEE GROUP WHEREAS PURCHASES ARE BOOKED IN THE ACCOUNTS. INFAC T, THIS HAS BEEN DISCUSSED AS WELL AS PROVED AS PER PARA 3(A) AND 3( B) ABOVE, THAT THE ASSESSEE HAS ALSO INFLATED ITS ACTUAL PURCHASES IN THE BOOKS. THIS HAS BEEN POSSIBLE SINCE THE ASSESSEE GROUP HAS NOT MAINTAINED QUANTITATIVE DETAILS OF THE STOCK AND, AS SUCH, IT IS EASY FOR THE ASSESSEE GROUP TO CONCEAL THE UNACCOUNTED SALES WHE REAS AT THE SAME TIME BOOKING THE INFLATED PURCHASES IN THE ACC OUNTS AND ADJUST THE SAME IN TERMS OF VALUE. BY FOLLOWING THIS MODUS OPERANDI, THE ASSESSEE GROUP MANAGES TO SUPPRESS THE REAL PROFIT IN HIS BUSINESS EQUIVALENT TO THE QUANTUM OF SALES. AS SUCH, IT IS NOT A CASE WHERE ONLY GROSS PROFIT IS TO BE TAXED WITH REGARD TO THE UNACCOUNTED SALES BUT THE ENTIRE SALE CONSIDERATION WOULD REPRESENT U NDISCLOSED AND UNACCOUNTED PROFIT OF THE BUSINESS. IN THIS BACKGRO UND, THE ENTIRE SALE CONSIDERATION DESERVES TO BE TREATED AS UNACCOUNTED INCOME OF THE ASSESSEE GROUP. ALSO, NO EVIDENCE OF UNACCOUNTED PU RCHASE OF STOCK ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 23 WAS FOUND DURING THE COURSE OF SEARCH AND IN THE SE IZED DOCUMENTS WHEREAS UNACCOUNTED SALES HAVE BEEN METICULOUSLY RE CORDED BY THE ASSESSEE. THIS WOULD ALSO SUGGEST THAT THE ENTIRE P URCHASES ARE BOOKED BY THE ASSESSEE IN THE ACCOUNTS AND NO FURTHER CRED IT WOULD BE DUE TO THE ASSESSEE WHILE DETERMINING TAXABLE PROFIT ON TH E BASIS OF UNACCOUNTED SALES. THE TOTAL UNACCOUNTED SALES OF THE ASSESSEE BASED ON THE EVIDENCES COLLECTED DURING THE SEARCH PROCEEDINGS ON 10.12.15 FOR THE AY 2009-10 AGGREGATE TO RS. 7,37,18,448/-, WHICH ARE TABULATED FROM PAGE NO. 32 TO PAGE NO. 44 ABOVE. THEREFORE, BASED ON THE ABOVE DI SCUSSION, THE TOTAL UNACCOUNTED SALES OF THE ASSESSEE OF RS. 7,37,18,44 8/- ARE ADDED BACK TO ITS TOTAL INCOME FOR THE AY 2009-10 AS UNACCOUNT ED OR UNEXPLAINED PROFIT. PENALTY PROCEEDINGS U/S 271(1)(C) ARE BEING INITIATED FOR CONCEALMENT OF INCOME. 28. PER CONTRA, THE LD. AR SUBMITTED THAT THE ISSUE TO BE DECIDED IN THIS GROUND IS TO WHOM THESE NOTEPADS RELATE TO, WHAT IS THE AMOUNT INVOLVED AND WHETHER THE ENTIRE SALE PROCEEDS CAN BE ADDED T O THE INCOME. IT WAS SUBMITTED THAT THE TRANSACTION IN THESE NOTEPADS DO NOT PERTAIN TO THE ASSESSEE AS IS EVIDENT FROM THE FOLLOWING:- (I) THE VARIOUS NOTEPAD ON THE BASIS OF WHICH THE ABOVE ADDITION HAS BEEN MADE WAS FOUND FROM THE RESIDENCE OF THE N ARENDRA LAKHI. (II) NARENDRA LAKHI IS PARTNER IN M/A BIHARI LAL HOLARAM AND ALSO IN ASSESSEE FIRM. (III) THERE IS NO MENTION OF THE NAME OF ASSESSEE FIRM ON THESE PAPERS. ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 24 (IV) IN SEARCH STATEMENT OF THE ASSESSEE RECORDED ON 10- 2-2015 WHEREIN IN REPLY TO Q.NO.19, HE EXPLAINED THAT THES E NOTE BOOKS ARE RELATED TO F.Y. 2008-09 AND MAY CONTAINS RECORDS OF HIS OLD FIRMS NAMELY SIDDHANT JEWELLS, ROYAL GEMS SOURCES AND KUS HBOO JEWELLS. IN THIS REPLY HE HAS NOWHERE REFERRED TO THE ASSESS EE FIRM. (V) THE SURRENDER OF RS.10.58 CR. WAS MADE BY SH. NAREN DRA LAKHI ON ACCOUNT OF LOOSE PAPERS (RS.400 LACS), EXC ESS CASH (64.20 LACS), EXCESS STOCK (469.38 LACS) AND EXCESS JEWELL ERY (125 LACS) IN RESPECT OF THE UNDISCLOSED INCOME OF M/S BIHARI LAL HOLARAM. (VI) THE AO AT PAGE 24 OF HIS ORDER HAS ACCEPTED THAT FR OM THE SEIZED MATERIAL, IT IS NOT POSSIBLE TO ASCERTAIN AS TO WHICH PARTICULAR ENTITY THE UNACCOUNTED SALES PERTAIN TO. 29. FROM THE ABOVE, IT CAN BE NOTED THAT THERE IS N O BASIS WITH THE AO TO RELATE ANY OF THESE NOTEPADS WITH THE ASSESSEE F IRM. HE HAS SIMPLY HELD THAT AS THE ADDITION ON THE BASIS OF THESE LOOSE PA PERS CANT BE MADE IN ANY OF THE ENTITIES OF BIHARI LAL HOLARAM GROUP FOR A.Y. 2009-10, THEREFORE IT IS APPROPRIATE AND LEGAL TO MAKE THE ADDITION IN THE HANDS OF THE ASSESSEE. THIS FINDING OF THE AO IS NEITHER APPROPR IATE NOR AS PER LAW. AN ADDITION CANT BE MADE IN THE HAND OF A PERSON FOR THE REASON THAT IT COULD NOT BE MADE IN THE HANDS OF OTHER PERSON EITHER BEC AUSE OF LIMITATION OF REOPENING OR OTHERWISE. THEREFORE WITHOUT ANY EVIDE NCE THAT THESE LOOSE PAPERS PERTAINS TO THE ASSESSEE, THE ADDITION MADE IN ITS HANDS IS UNCALLED FOR AND BE DELETED. 30. IT WAS ALSO SUBMITTED THAT THE AO HAS WORKED OU T THE SALES ON THE BASIS OF THESE PAPERS AT RS.7,37,18,448/-. IN DOING SO HE HAS ALSO CONSIDERED VARIOUS PAPERS WHERE NO DATE IS MENTIONE D AS PERTAINING TO THE YEAR UNDER CONSIDERATION. THEREAFTER HE HAS CONSIDE RED THE ENTIRE SALE ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 25 AMOUNT AS INCOME OF THE ASSESSEE BY PRESUMING THAT PURCHASES IN RELATION TO SUCH SALES IS ALREADY RECORDED IN THE BOOKS OF A CCOUNTS. THIS PRESUMPTION IS APPARENTLY INCORRECT AS IN THE BOOKS OF ACCOUNTS THE PURCHASES RECORDED IS ONLY RS.2.40 CR. AND THE SALE S RECORDED IS 3.08 CR. THEREFORE ON PURCHASE OF 2.40 CR., SALES OF 10.45 C R. (7.37 + 3.08) CANT BE PRESUMED. THIS WOULD MEAN A G.P. RATE OF 77% WHI CH IS A IMPOSSIBILITY. IN ANY CASE THE UNRECORDED SALES ITSELF CANT BE CO NSIDERED AS INCOME. AT THE MOST, THE GROSS PROFIT ON SUCH SALES CAN BE CON SIDERED AS INCOME. FOR THIS RELIANCE IS PLACED ON THE FOLLOWING CASES:- MOHAN SADHANI VS. CIT 304 ITR 52 (MP) CIT VS. BALCHAND AJIT KUMAR 263 ITR 610 (MP) CIT VS. PRESIDENT INDUSTRIES 258 ITR 654 (GUJ) 31. IT WAS FURTHER SUBMITTED THAT IN COURSE OF SEAR CH, THE STOCK FOUND WAS VALUED AT RS. 23,69,75,523/-. AFTER CONSIDERING THE BOOK STOCK OF M/S BIHARI LAL HOLARAM AND OF THE ASSESSEE FIRM AT RS. 18,98,37,741/-, THE EXCESS STOCK WAS DETERMINED AT RS. 4,69,37,782/-. T HIS EXCESS STOCK WAS OFFERED IN M/S BIHARI LAL HOLARAM. THEREFORE IN CAS E ANY UNDISCLOSED INCOME IS DETERMINED ON THE BASIS OF THE NOTEPADS/L OOSE PAPERS IN THE YEAR UNDER CONSIDERATION, DIRECTION BE GIVEN TO RED UCE THE EXCESS STOCK DETERMINED AT THE TIME OF SEARCH AND OFFERED IN M/S BIHARI LAL HOLARAM. IN VIEW OF THE ABOVE, THE ADDITION OF RS.7,37,18,448/- MADE BY THE AO IS GROSSLY UNJUSTIFIED AND THE SAME BE DELETED. 32. IT WAS FURTHER SUBMITTED THAT AS SUBMITTED BEFO RE THE LD CIT(A), A SIMILAR NOTE PAID FOUND FOR A.Y. 2010-11 TO 2016-17 HAS BEEN CONSIDERED AS BELONG TO BIHARI LAL HOLARAM (95%) AND LAKHI GEM S (5%) IN THE PETITION FILED BEFORE THE SETTLEMENT COMMISSION. ON THIS BAS IS, BOTH THE FIRM OFFERED ADDITIONAL INCOME BY APPLYING NET PROFIT RA TE OF 10% ON THE SALES ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 26 MENTIONED IN THEN NOTE PAD BEFORE THE SETTLEMENT CO MMISSION. THE HONBLE SETTLEMENT COMMISSION VIDE ORDER DATED 22-0 4-2019 HAS ACCEPTED THE CONTENTION THAT ONLY NET PROFIT ON THE SALES IS TO BE TAXED AND DIRECTED TO TAX THE PROFIT BY APPLYING NET PROFIT RATE OF 10 % ON THE UNDISCLOSED SALES WORKED OUT ON THE BASIS OF NOTE PAD. HE FURTH ER DIRECTED TO TAX 95% OF THE PROFIT IN THE HANDS OF BIHARILAL HOLARAM AND 5% OF THE PROFIT IN THE HANDS OF LAKHI GEMS. IF THIS ORDER IS CONSIDERED FO R THE YEAR UNDER CONSIDERATION ALSO THAN EVEN THOUGH THERE IS NO MEN TION ON THE PAPERS/NOTE PAD THAT THE SAME RELATES TO LAKHI GEMS , THE SALES ON THE BASIS OF NOTE PAD CAN BE TREATED AS 95% BELONGING T O BIHARI LAL HOLARAM AND 5% RELATES TO LAKHI GEMS. ON THIS SALES NET PRO FIT RATE OF 10% MAY BE APPLIED AS ACCEPTED BY SETTLEMENT COMMISSION. ON THIS BASIS THE PROFIT OF THE ASSESSEE WORKS OUT TO RS.3,68,592/- COMPUTED AS UNDER:- TOTAL SALES ON THE BASIS OF NOTE PAID AS PER AO R S.7,37,18,448/- SHARE OF LAKHI GEMS 5% RS. 36,85,922/- THE PROFIT EARNED ON THIS SALES 10% OF SALES RS.3 ,68,592/- THUS AT THE MOST, EVEN THOUGH THERE IS NO DOCUMENT RELATING TO LAKHI GEMS, THE ADDITION CAN BE RESTRICTED TO RS.3,68,592 /- ONLY. IT WAS SUBMITTED THAT THE SAME WAS A PREJUDICE CONTENTION RAISED BY THE ASSESSEE, HOWEVER, THE LD CIT(A) HAVING DECIDED THA T THE DOCUMENTS SO FOUND AND SEIZED DOESNT BELONG TO THE ASSESSEE, HA S STILL CONFIRMED THE ADDITION TO THE TUNE OF RS 3,68,592/- WHICH MAY BE DIRECTED TO BE DELETED. 33. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED POSITION WHICH EMERGES IS THAT THE IMPUGNED DOCUMENTS INVENTORISED AS ANNEXURE AS EXHI BIT 32 TO 101 WERE SEIZED FROM THE RESIDENCE OF SHRI NARENDRA LAKHI, T HE PARTNER OF THE ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 27 ASSESSEE FIRM DURING THE COURSE OF SEARCH CONDUCTED ON 10.12.2015. IN HIS STATEMENT RECORDED U/S 132(4) ON 10.12.2015, IN RESPONSE TO QUESTION NO. 19, SHRI NARENDRA LAKHI HAS STATED THAT HE HAS GONE THROUGH PAGES NO. 32 TO 101 OF SEIZED DOCUMENTS AND THE SAME BELO NGS TO HIM AND HIS FAMILYS FIRMS FOR THE YEAR 2008 AND HE WILL LATER ON SUBMIT THE EXPLANATION RELATING TO THE TRANSACTIONS AND OTHER DETAILS STAT ED IN THE SAID SEIZED DOCUMENTS. IN HIS SUBSEQUENT STATEMENT RECORDED U/ S 132(4) ON 15.12.2015, IN RESPONSE TO QUESTION NO. 5, HE HAS S TATED THAT THE LOOSE PAPERS, DIARIES, NOTE BOOKS WHICH HAVE BEEN SEIZED FROM THE OFFICIAL PREMISES AND THE RESIDENTIAL PREMISES BELONGS TO M/ S BHIHARI LAL HOLA RAM AND M/S LAKHI GEMS. WE THEREFORE FIND THAT THOUGH IN THE INITIAL STATEMENT, HE WAS NOT SPECIFIC ABOUT WHICH FIRMS TH E DOCUMENTS PERTAINS TO AND HAS SOUGHT TIME TO EXPLAIN THE TRANSACTIONS, HOWEVER, IN THE LATTER STATEMENT, HE HAS CATEGORICALLY STATED THAT THE DOC UMENTS SO SEIZED PERTAINS TO TWO FIRMS NAMELY, M/S BHIHARI LAL HOLA RAM AND M/S LAKHI GEMS, THE ASSESSEE FIRM. THEREFORE, IN LIGHT OF CLE AR ADMISSION ON PART OF THE PARTNER OF THE ASSESSEE FIRM IN HIS STATEMENT R ECORDED U/S 132(4), THE DOCUMENTS SO FOUND AND SEIZED CLEARLY BELONG PARTLY TO THE ASSESSEE FIRM AND PARTLY TO M/S BHIHARI LAL HOLA RAM. THE DESCRI PTION ON THESE DOCUMENTS CLEARLY REFERS TO UNACCOUNTED SALES/TURNO VER. THE LD CIT(A), FOLLOWING THE DECISION OF THE SETTLEMENT COMMISSION WHEREIN SIMILAR DOCUMENTS FOUND AND SEIZED PERTAINING TO SUBSEQUENT YEARS WERE SUBJECT MATTER OF EXAMINATION FOR SUBSEQUENT ASSESSMENT YEA R, HAS BIFURCATED THE SAME IN THE RATIO OF 5:95 WHEREIN 5% OF SALES HAVE BEEN ATTRIBUTED TO ASSESSEE AND 95% TO M/S BHIHARI LAL HOLA RAM AND HA S APPLIED NET PROFIT OF 10% ON SUCH SALES. THOUGH THE FINDINGS OF THE S ETTLEMENT COMMISSION ARE NOT BINDING ON THIS TRIBUNAL, HOWEVER, WHERE SI MILAR FACTS PERMEATE THROUGH THE YEARS UNDER CONSIDERATION AND IN ABSENC E OF ANYTHING CONTRARY BROUGHT ON RECORD BY THE REVENUE, WE SEE NO JUSTIFI ABLE BASIS TO DISTURB ITA NO. 1306/JP/2019 & CO NO. 04/JP/2020 ACIT, JAIPUR VS. M/S LAKHI GEMS, JAIPUR 28 THE BASIS OF ALLOCATION OF UNACCOUNTED SALES BETWEE N THE TWO FIRMS AND ARRIVING AT THE NET PROFIT AS SO DONE BY THE LD CIT (A) FOLLOWING THE DECISION OF THE SETTLEMENT COMMISSION. IN THE RESULT, GROUN D OF APPEAL TAKEN BY THE REVENUE AS WELL AS THAT OF THE ASSESSEE IS HERE BY DISMISSED. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AND T HE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED IN LIGHT OF AFORESAID DI RECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 22/06/2021. SD/- SD/- LANHI XKSLKBZ FOE FLAG ;KNO ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 22/06/2021 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT, CENTRAL CIRCLE-03, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S LAKHI GEMS, JAIPUR & ACIT, CIRC LE-03, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1306/JP/2019 & CO NO. 04/JP/202 0} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR